Are Interns Killing the Job Market?

In case you missed it, last Friday's jobs number was underwhelming. The economy added just 54,000 jobs in May—around a third of what economists had predicted--while the headline unemployment rate ticked up to 9.1 percent.

Cue a week of back and forth on the state of the economy that somehow missed any discussion of the following salient points:

• Local governments cut 28,000 jobs over the month, continuing a trend of downsizing in the public sector. While certainly not encouraging for the economy, these positions tend to be trailing indicators due to government budgeting processes—especially at the state and local levels, where deficits are verboten.

• Temp hiring has fallen off a cliff. In March, private businesses hired 30,000 temporary workers. In April and May, they shed 3,000 of them. That has the potential to be a really bad sign, as temp hiring is often seen as a forerunner to permanent hiring.

On the other hand, it could be that the end of the school year is suppressing demand for temps, with interns picking up the slack for less cost. And, according to a BLS spokesperson, interns aren’t necessarily counted in the overall employment numbers:

"An individual must be engaged in work for pay or profit to be counted as employed. Internships--as I understand the term--are unpaid work experience or training opportunities. Unpaid work is not counted as employment except in special instances of family members working in the family-owned business or farm without formal pay."

"If an individual has a for-pay job, their industry classification is based on the primary business activity of their employer, regardless of their expected employment duration with that employer. For example, a college student working a for-pay summer job at a law firm would be classified in Legal Services, even though the job will only last a few months. There is no way to identify such temporary jobs in our monthly survey data."

To summarize: if interns are being paid, they'll likely be getting counted somewhere in the report, but not as temps. If they're not being paid, they won't be counted at all. Claro?

Whether or not that fully explains the seeming stagnation of the temp market is open to question. But it seems to reasonable to assume that it's having some effect—and while it may be helping the companies involved to save a little on payroll, it's likely not doing much to stimulate the anemic demand levels that so many firms are citing as barriers to their willingness to hire.

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